Despite the concern over the last few years about the number of homeowners who owe more on their mortgages than their homes are worth, it turns out that nearly one third of owner-occupied homes in American have no mortgages at all.   In a recent study using third quarter data from TransAmerica, the real estate website Zillow® found that 20.6 million Americans own their homes outright.  This is 29.3 percent of all homeowners.

Some of these homeowners have paid off their mortgages over time while others purchased their homes for cash.  Not surprisingly there were higher rates of homeownership in older age groups, in areas where housing is generally less expensive, and among homeowners with higher credit scores.  Data used in the study covers more than 800 metro areas, 2,100 counties and 21,900 ZIP codes nationwide.

States with the highest rates of non-mortgaged homeownership are West Virginia (45 percent), Louisiana (39 percent) and Arkansas (38 percent).  Nevada had the lowest rate (20 percent) closely followed by the District of Colombia and California at about 20 and 22 percent respectively.

Among the 30 largest metropolitan areas the highest rate was in Pittsburgh (38.6 percent), Tampa (33.2 percent).  New York, Cleveland and Miami followed, all within a point of the national average.  The lowest rates were in the Washington, DC metropolitan area which was lower than the District itself at 15.5 percent, and Atlanta (17.7 percent).  Las Vegas, Denver, and Charlotte were also at 20 percent or lower.

The study found that the geographic differences were largely driven by differences in the median home values.  This was particularly true at the county level where free and clear homeownership rates were negatively correlated with the median home values in those counties.  Fifty-three percent of homes bought by low credit free and clear homeowners were sold for $100K and less, while 85% of homes were sold for $200K and less.

Not surprisingly,  20.5 percent of those in the 54 to 74-year old age group had the highest rate of non-mortgaged homeownership at 20.5 percent followed by those 74 to 84 years old (17.9 percent).  But the study also found that as a percentage of homeowners of all homeowners the 20- to 24-year age group 34.5 percent were mortgage free.  The study's authors speculate that homes owned by those in the youngest cohort might have mostly been bought for cash by parents or guardians or their owners are young millionaires.  A similar pattern was found in the cohorts for ages 25 to 49 so the rates may also reflect the increase in total homeownership (both mortgaged and not) with an increase in age.

Among homeowners who own their homes outright, 44 percent have a high credit scores - between 800 and 900. Only 15.5 percent of homeowners with the highest credit rating of 900-990 are free-and-clear, possibly because these homeowners choose not to pay off their mortgages and diversify their savings to safeguard against potential home depreciation.  Twenty-nine percent of low credit homeowners (501-600) are free and clear.

"So far we have used our unique data on how much homeowners owe on their homes primarily to identify underwater and delinquent groups of homeowners," said Zillow Chief Economist Dr. Stan Humphries. "But looking at those homeowners who are free-and-clear is important, too. Homeowners unencumbered by a mortgage may be more flexible than indebted homeowners, and therefore more apt or willing to list their homes or enter the market for a new property. By determining where these homeowners are located, we can also gain insight into potential inventory and demand in those areas, as well."